Module 7 - Personal Auto Policy (PAP)

The following types of automobiles are eligible for coverage under the PAP:

1. Four-wheel, private passenger auto including station wagons (Private passenger vehicles owned by a business can be covered by the PAP for both personal and business use. Typically vehicles covered by the PAP cannot be used for the transportation or delivery of goods unless such activity is incidental to the business or for use in farming or ranching.), 2. Pickup or van provided it is less than 10,000 lbs. gross vehicle weight and is not used to deliver persons or property for a fee (Vehicles used in farming or ranching are eligible.), 3. Owned or leased private passenger-type autos are eligible if leased under a written agreement and the lease is for a continuous period of at least 6 months.

**NOTE**

A Trailer means a vehicle designed to be pulled by a passenger auto, station wagon, pick-up truck or van.

Non-Owned Auto Defined

A non-owned vehicle is defined as any passenger auto, station wagon, pick-up truck, van or trailer while in the custody of or being operated by the insured or a family member that is not a vehicle listed on the policy Declarations. A non-owned auto is also defined as an auto being used on a temporary basis to replace a covered auto that is out of service due to breakdown, servicing, loss or destruction. If there is a loss to a non-owned auto, the insurer will provide the broadest coverage applicable to any covered auto shown in the Declarations.

Insured's Duties for Uninsured/Underinsured Motorists Coverage

A person seeking payment from his or her Uninsured or Underinsured Motorists Coverage must promptly notify the police if a hit-and-run driver is involved and promptly send the insurer copies of the legal Personal Auto Policies if a suit is brought. A suit may not be brought by an insured until 60 days after that person notifies the insurer of their belief that the prospective defendant is an uninsured motorist.

Part B - Additional Exclusions

All exclusions for Part A apply to Part B as well as war (declared or undeclared), civil war, insurrection, and rebellion or revolution.

Definition of an Insured in Part C (UM/UIM)

An Insured, as used in Part C, means the named insured or any family member or any other person occupying the covered auto, or any other auto operated by the insured. Also, the named insured or any family member struck by an uninsured vehicle as a pedestrian is covered under Part C. The coverage also applies to any person for bodily injury damages that person is entitled to recover due to the negligence of the uninsured driver. EX: if J is a passenger in an insured auto and killed in an accident by the negligence of an uninsured/underinsured motorist, J's family would have the right to make a claim against the UM/UIM coverage.

Motor Vehicles that are not Uninsured/Underinsured Vehicles

An Uninsured Motor Vehicle does not include any vehicle or equipment: 1. Owned by the insured, 2. Owned or operated by a self-insurer under any applicable motor vehicle law except a self-insurer which is or becomes insolvent, 3. Owned by any government entity, 4. Operated on rails or crawler treads, 5. Farm tractor or equipment designed mainly for use off public roads unless being used on public roads, 6. While located for use as a residence or premises.

Part A Minimum Limits of Liability Required in NC

As already mentioned, NC requires that a vehicle owner carry at least $30,000/$60,000/$25,000 PAP split limits of liability coverage. Other higher limits are available. The split limits method of determining payments is as follows: 1. The first number, $30,000, is for bodily injury (BI) representing the maximum that will be paid for any one person suffering bodily injury (BI) in an occurrence (accident). 2. The second number, $60,000, is for bodily injury (BI) representing the most that the PAP will pay for any combined number of persons suffering bodily injuries in an occurrence (accident). 3. The third number, $25,000, is for property damage (PD) representing the most the insurer will pay for property damage (PD) from a single occurrence (accident).

Definition of an Uninsured/Underinsured Vehicle

Before UM/UIM applies, the vehicle involved must meet one of the following policy definitions of an uninsured/underinsured vehicle: 1. A vehicle not covered by an auto liability policy, bond or security deposit with the Insurance Commissioner's office; 2. A vehicle that has coverage, but does not meet the North Carolina minimum liability requirements; 3. A vehicle that has coverage, but the insuring company denies coverage or is or becomes insolvent; 4. A hit and run vehicle that cannot be identified or located. This situation is classified as an Uninsured Motorist. In this situation the policy only pays for bodily injury only. It does not provide payment for property losses.

Personal Auto Policy Part D Deductibles

Both Collision and Other than Collision (OTC) coverage generally have a deductible. However, deductibles do NOT apply to a loss caused by: 1. Fire or lightning; 2. Smoke due to a sudden, unusual and faulty operation of any fixed heating equipment serving the premises in which the auto is stored; 3. The stranding, sinking, burning, collision or derailment of any conveyance in or on which the auto is being transported.

Personal Auto Policy Collision Coverage

Collision provides coverage, as shown on the Declaration page, if the insured vehicle (your covered auto or non-owned auto including equipment) makes direct and accidental impact with another vehicle or object. It also covers upset (rolling the car over).

Out-of-State Coverage

If the auto is used in another state (other than where it is principally garaged), the PAP amends to the minimum requirements of that state, but not less than the amount carried under the policy.

**NOTE**

Fighting a claim in court is the decision of the insurance company. The insured does not have any part of the decision. Because the insurer makes the decision the insurer pays the defense cost.

**NOTE**

For non-owned autos, the insurer provides the broadest coverage applicable to any covered auto shown on the policy Dec page.

Personal Auto Policy (PAP)

Formerly referred to as the Family Auto Policy. NC requires all persons who register and purchase license plates for a personal automobile to carry at least the required state minimum liability coverage. The PAP sold in NC is a policy designed to provide no less than the minimum liability limits as required by the state of NC on a per occurrence basis. Liability coverage indemnifies drivers for their negligent acts such as causing an automobile accident.

**NOTE**

If a person purchases Collision coverage, Other Than Collision (OTC) will automatically be included. A person can buy just OTC. Each coverage part can have the same deductible, no deductible or a different deductible.

Loss Payee (Part D)

If an auto is financed, the financing institution is referred to as the Loss Payee. The financing institution will generally require that the PAP have Collision and Other than Collision coverage. If this coverage is cancelled or non-renewed, the insurer will provide coverage for up to ten (10) days to protect the Loss Payee's interest.

Part C - Arbitration in UM/UIM

If the insured (you) and insurance company to which the UM/UIM applies do not agree on the amount of the claim or if Part C applies, the insured (you) may make a written demand for arbitration. Arbitration only applies to Part C of the PAP.

Appraisal (Part D)

If the policyholder and insurance company cannot agree on the amount of the insurer's liability, either party has the right to request appraisal of the loss. Each party pays their own appraiser and jointly hires an umpire who is impartial. Each appraiser determines the value of the claim. If there is no agreement, the claim is given to the umpire. The agreement of any two parties settles the claim.

Other Insurance

If there is other insurance designed to cover the risk, the Personal Auto Policy will only pay its proportionate share up to the applicable limits. This provision applies to all parts of the PAP.

Miscellaneous Type Vehicle Endorsement

In NC, motorcycles along with golf carts, travel trailers and similar types of vehicles are covered by the Miscellaneous Type Vehicle Endorsement. This endorsement, when attached to the Personal Automobile Policy, will allow a vehicle to be considered a covered auto and extends insurance coverage to a motorcycle named in the Declarations. If the covered vehicle is a motorcycle, the endorsement will extend the medical payments coverage to motor vehicles with fewer than four wheels.

Part D Salvage Charges

In addition, the insurer will pay general average and salvage charges that the insured or any of the insured's FAMILY MEMBERS are legally responsible for in transporting an auto.

Supplementary Payments

Included in the Part A coverage and include the following costs: 1. The insurer will pay the following on behalf of an insured: a. Premiums on appeal bonds and bonds to release attachments in any suit we defend. We have no duty to purchase bonds in an amount exceeding our Limit of Liability, and we have no duty to apply for or furnish these bonds; and b. All costs taxed against the insured and interest accruing after a judgment is entered in any suit the insurer defends. The insurer's duty to pay post-judgment interest ends when the insurer offers to pay that part of the judgment which does not exceed the policy limit of liability for the coverage. 2. The insurer will pay the following to an insured: a. Up to $250 for the cost of bail bonds required because of traffic law violations resulting from an accident. The accident must result in bodily injury or property damage covered under the PAP; b. Up to $200 a day for loss of wages or salary, but not other income, because of attendance at hearings or trials at the insurer's request; c. Up to $200 for expenses incurred by an insured for Emergency first aid to others performed at the scene of an accident that involves any auto covered by the PAP; and d. Other reasonable expenses incurred at the insurer's request. The amount of any costs, wages, salary, or other expenses listed above that are incurred by an insured must be reported to the insurer by the insured before the insurer will make payment.

An Insured

Includes any person using the vehicle with the permission of the named insured. This includes relatives by blood or marriage. Also covered are foster children or wards living in the same household with the named insured.

Part A Liability Coverage - Persons Insured

Insured as used in Part A means: 1. You or any family member for the ownership, maintenance or use of any auto or trailer. 2. Any person using your covered auto. 3. For your covered auto, any person or organization but only with respect to legal responsibility for acts or omissions of a person for whom coverage is afforded under this Part. 4. For any auto or trailer, other than your covered auto, any person or organization but only with respect to legal responsibility for acts or omissions of you or any family member for whom coverage is afforded under this Part. This provision applies only if the person or organization does not own or hire the auto or trailer.

Temporary Substitute Auto

Is a replacement vehicle for a vehicle listed on the listed in the Declarations such as a rental auto or a loaner auto while the insured's auto is being serviced or repaired.

Non-owned Auto

Is a vehicle that has been rented, leased or borrowed and is used for personal or business purposes. If there is a loss to a non-owned auto, the insurer will provide the broadest coverage applicable to any your covered auto shown in the Declarations.

**NOTE**

Liability coverage follows the auto, not the driver. EX: if someone is driving your vehicle and is in an at-fault accident, your insurance is primary coverage; not the driver's insurance.

Covered Automobile

Means any automobile listed in the Declarations, any newly acquired vehicles (during the policy period), and any trailer the insured owns. It also includes any auto or trailer used (with the owner's permission) as a substitute vehicle for the insured's covered auto while the covered vehicle is out of normal service because of breakdown, repair, loss or destruction.

Named Insured

Means the individual whose name is shown on the Declarations page of the policy. The spouse of the named insured is automatically insured if the spouse lives in the same household with the named insured.

Occurrence

Means the singular event that causes an at-fault loss. Occurrence based policies pay up to the full limits of the policy no matter how many covered events occur during the policy period.

Newly Acquired Vehicles

Newly acquired auto means any of the following types of vehicles the insured becomes the owner of during the policy period: 1. A private passenger auto or station wagon type; or 2. A pickup truck or van that has a Gross Vehicle Weight as specified by the manufacturer of less than 10,000 pounds and is not used for the delivery or transportation of goods and materials unless such use is (a) incidental to the insured's business of installing, maintaining or repairing furnishings or equipment; or (b) for farming or ranching.

**NOTE**

Occupying means in; upon; getting in, out, on or off an insured vehicle.

Personal Auto Policy Other than Collision (OTC) (Commonly referred to as Comprehensive)

Other than Collision (OTC) coverage protects against almost all accidental damage. Other than Collision (OTC) coverage includes losses due to fire, theft or larceny, explosion, earthquake, windstorm, missiles or falling objects, hail, water or flood, vandalism or malicious mischief, riot or civil commotion, glass breakage and contact with birds or animals (wild or domestic).

Part B - Persons Insured

Part B insures the following persons: 1. The insured while occupying the insured vehicle or any non-owned auto, 2. Any family member while they occupy the insured vehicle or any non-owned auto, 3. Other persons while they occupy the insured auto, 4. The insured and family members if struck as pedestrians by an auto.

Personal Auto Policy Part D Personal Effects

Part D covers loss by fire or lightning to clothes or other personal effects which are owned by an insured or any family member and are in a covered vehicle.

Liability Premium Rating Factors

The Driving Record and driving experience will have the largest impact on insurance premium. NC law does not allow age or gender as a consideration in premium rating. Another factor is the usage of the motor vehicle. The following are the usage factors: 1. Pleasure Use; 2. Use to travel to work which has two factors (1) used for less than 10 miles one way, (2) used for more than 10 miles one way; 3. Business use; and 4. Agricultural use

Legal Action Against Us

The insured agrees not to sue the insurance company for failure to settle a claim until the insured has complied fully with all terms of the policy and/or the obligation to pay has been determined by judgment after trial or the insurer agrees in writing that the insurer has an obligation to pay.

Part A Liability Coverage Exclusions

The PAP liability section does not provide coverage for: 1. Bodily injury or property damage due to intentional acts by an insured (The exclusion applies to damage in excess of the state minimum financial responsibility law. North Carolina minimum financial responsibility is **$30,000 for a single Bodily Injury, $60,000 for Bodily Injury to two (2) or more persons and $25,000 for Property Damage.** EX: if you decided to ram the car that cut you off and caused Bodily Injury of $15,000 and Property Damage of $10,000 - your policy would pay for the losses.); 2. Property damage for property owned or being transported by the insured including property rented to, used by or in the care of an insured; 3. An employee of any insured person who sustains bodily injury in the course of employment (This exclusion does not apply to domestic employees unless Workers' Compensation benefits are available); 4. An insured employed or otherwise engaged in the business of selling, repairing, servicing, storing and parking (Commercial Auto or Garagekeepers insurance would be needed in this case.) This exclusion does not include the covered vehicles listed in the policy. The purpose of this exclusion is to limit the exposure of the insurance company. 5. If a person is insured under a Nuclear Energy Liability policy; 6. Ownership, maintenance or use of a motorized vehicle of fewer than 4 wheels; 7. Any vehicle used for delivery of persons (taxi) or property (livery) for a fee. (This exclusion does not apply to share-the-expense car pool.)

Fraud or Material Misrepresentation

The PAP provides no coverage for an insured that has made fraudulent statements or engaged in fraudulent conduct. A material misrepresentation will not be covered beyond the minimum liability requirements under North Carolina regulations. Further, if the insurer has made a payment, the insurer will be allowed to recover the amount paid from the insured.

Part D Exclusions

The Personal Auto Policy will not pay for the exclusions in Coverage A as well as the following: 1. Losses occurring while the covered auto or any non-owned auto is being used for livery or taxi service (This exclusion does not apply to share-the-expense car pools.); 2. Losses due to or as a consequence of war, radioactive contamination, insurrection, civil war, and rebellion or revolution; 3. Damages due and confined to wear and tear, freezing, mechanical breakdown and electrical breakdown; Note: This exclusion does not apply if damages result from total theft of the auto. 4. Losses due to any electronic equipment or device that records, emits, amplifies, receives or transmits audio, visual or data signals including the accessories for the items such as tapes, records or discs; Note: The exclusion does not apply to any of the items if permanently installed by the vehicle manufacturer or permanently installed by other than the vehicle manufacturer. There is a $1,000 deductible for items installed by other than the vehicle manufacturer. 5. Losses to a camper body or trailer that is not shown in the Declarations unless coverage was requested during the policy period or within 30 days of acquisition; 6. Losses to awnings, cabanas or items designed to be used on a trailer to create additional living space; 7. Loss due to confiscation or destruction by government or civil authorities because of the insured's illegal activities or failure to comply with environmental laws; 8. Losses to any custom furnishing or equipment in or upon any covered vehicle. (This exclusion does not apply to the first $1,000 of loss to customizing equipment. The exclusion does not apply to a camper body shown in the Declarations or a cap, cover or bed liner in or upon any pick-up truck owned by the insured.)

Additional Duties for Damage to Your Auto Coverage

The insured is required to do the following: 1. Take reasonable steps to protect the damaged auto and its equipment from further loss (The insurer pays reasonable expenses to do this.), 2. Notify police promptly if the vehicle is stolen, 3. Permit the insurer to inspect and appraise the damaged property before its repair or disposal.

Bankruptcy

The insured's bankruptcy or insolvency does not relieve the insurance company of its obligation.

Part B - Medical Payments Part B Insuring Agreement

The insurer agrees to pay reasonable expenses for necessary medical and funeral services incurred within 3 YEARS of the date of an accident without regard to fault. Medical payments are paid on a per person, per occurrence basis. Typical Medical Payments (also known as MedPay) coverage is $1,000; however, larger amounts may be purchased. This coverage is NOT MANDATORY on the PAP.

Exclusions in Part C (UM/UIM)

The insurer does not provide coverage for property damage or bodily injury sustained by any insured: 1. If the insured or the insured's legal representative settles any claim without notifying the insurer and receiving written consent; 2. While occupying a covered auto while it is being used as a livery or public conveyance (This exclusion does not apply to a share-the-expense car pool.); 3. Using a vehicle without a reasonable belief that that insured is entitled to do so (This exclusion does not apply to a family member using a covered auto which is owned by an insured.); 4. For the first $100 of the amount of property damage to the property of each insured as the result of any one accident (Think of this as a deductible.); 5. For damage to property contained in or struck by a motor vehicle, other than a covered auto, owned by the (you) insured or any family member; 6. While occupying, or when struck by, any motor vehicle owned by the insured or any family member which is not insured for coverage under the policy (This includes a trailer used with that vehicle.); 7. For property damage caused by a hit-and-run (uninsured) vehicle whose operator or owner cannot be identified (North Carolina does not recognize losses caused by unidentified phantom vehicles or drivers as far as property damage is concerned.); 8. For punitive or exemplary damages or legal costs related to such damages; 9. For claims applicable to Workers' Compensation or disability benefits law.

Part D Payment of Loss

The insurer has the option of paying money, repairing or replacing the damaged or stolen property.

Part E - Insureds Duties After an Accident

The insurer must be notified of how, when and where an accident or a loss happens, including names and addresses of witnesses. A person seeking recovery for damages must: 1. Cooperate with the insurer in investigation and settlement of a claim, 2. Promptly send copies of any notices or legal papers received in connection with an accident or loss, 3. Submit to an oral examination under oath, 4. Submit to a physical examination as often as the insurer requires (The insurer will pay the cost of the exams.), 5. Authorize the insurer to obtain medical reports and other pertinent records, 6. Submit a proof of loss when required by the insurer.

No Benefit to Bailee (Part D)

The insurer will not directly or indirectly benefit any bailee. For example, if a car was taken to a garage for storage and is damaged, the insured must seek recovery under the garage's Garagekeeper Policy. A Bailee is a person or business entrusted with the care of personal property belonging to others.

Insuring Agreement in UM/UIM

The insurer will pay compensatory damages which an insured becomes legally entitled to recover from the owner or operator of an uninsured or underinsured motor vehicle because of bodily injury sustained by an insured and caused by an accident with an uninsured motorist. The owner's or operator's liability for these damages must arise out of the ownership, maintenance or use of the uninsured motor vehicle. Any judgment for damages arising out of a suit is not binding on the insurer unless the insurer has been given a copy of the summons, complaint or other process against the uninsured motorist.

Part A Insuring Agreement

The insurer will pay damages for bodily injury or property damage for which any insured becomes legally responsible because of an auto accident up to the policy limits. Damages include prejudgment interest awarded against the insured. The insurer will settle or defend, as the insurer considers appropriate, any claim or suit asking for these damages. In addition to the limit of liability, the insurer will pay all defense costs the insurer incurs. EX: J has a PAP with split limits of 100/300/50. J is involved in an at-fault accident with bodily injury damages to E in the amount of $100,000. The insurer decides to fight the claim in court. The court subsequently finds against the insured ordering payment of $100,000. The insurance company defense cost was $5,000. The amount the insurer will pay is the $100,000 judgment and the $5,000 defense cost.

Part D Transportation Expense (Theft)

The insurer will pay, without application of a deductible, up to $15 per day to a maximum of $450 for: 1. TRANSPORTATION EXPENSES incurred by the insured in the event of a total theft of a covered auto (This applies only if the Declarations indicate that Other Than Collision is provided for that auto.); 2. LOSS OF USE EXPENSES for which the insured becomes legally responsible in the event of the total theft of a non-owned auto. (This applies only if the Declarations indicate that Other Than Collision is provided for any your covered auto.) The insurer will pay only expenses incurred during the period beginning 48 hours after the theft and ending when the covered auto or the non-owned auto is returned to use or the insurer pays for the loss of the vehicle loss.

Part B - Limits of Liability

The liability limits shown in the Declarations for Part B is the most the insurer will pay for each person in any occurrence regardless of the number of claims made.

Limits of Liability

The most that the insured's (your) policy will pay is the limit of liability shown on the Declarations page of the policy. This is the total amount that will be paid regardless of the number of insured persons or vehicles that are involved. The amount paid under Part C will be reduced by any amounts the insured collected from any other source such as Workers' Compensation.

(Policy Premium) Changes

The premium for each of covered autos is based on information the insurer has received from the insured or other sources. Premium adjustment may be made as the result of a change in: 1. The type and use of an auto, 2. Coverage or coverage limits, 3. Rating territory, 4. Eligibility for discounts and other premium credits.

**NOTE**

The right to subrogation exists in Part C the same as in Part B Medical payments.

Part C - Uninsured/Underinsured Motorists

This coverage part is sometimes referred to as Combined Uninsured and Underinsured Motorist (also referred to as UM/UIM) and is a MANDATORY coverage in NC. In the Personal Auto Policy the coverage is in 2 parts: (1) Uninsured Motorist (UM) and (2) Underinsured Motorist (UIM). The limits of liability for UM/UIM is generally the same as the Part A liability limits, but may be written with different amounts. A PAP with the minimum Bodily Injury and Property Damage limits are required to include Uninsured Motorists coverage. A PAP with limits greater than the minimum must provide combined Uninsured/Underinsured Motorists coverage.

Liability Coverage (Part A)

This is the primary section of the Personal Auto Policy. It is the coverage that is designed to pay for the negligence of the insured driver when causing bodily injury and/or property damage to another that is referred to as a third-party. Under the law, a person causing harm to another through his or her negligence can be held liable to pay for the damages inflicted. The liability section can be separated into three parts: Bodily Injury Liability, Property Damage Liability and Supplementary Payments.

Part D - Damage to your Auto (Physical Damage)

This section of the Personal Auto Policy is NOT mandatory coverage. However, most lending institutions will require this coverage as long as the auto is being financed or leased. Personal Auto Policy Part D provides 2 major types of coverage, (1) Collision coverage and (2) Other than Collision (OTC) coverage.

Additional Vehicle

This vehicle will have the broadest coverage of any vehicle described on the Declarations page. The new vehicle must be reported within 30 DAYS of acquisition.

Replacement Vehicle

This vehicle will have the same coverage as the vehicle it replaces. The insurer must be notified within 30 DAYS of acquisition. If the insured wishes to add or continue coverage for Damage to the Insured's Auto, the coverage must be requested.

Vehicles Eligible for the PAP

To be eligible for coverage under a PAP, an auto must be owned or leased by an individual or by a married couple who are residents of the same household. Autos owned jointly by other persons who are not related and residents of the same household may be insured with a special endorsement.

Purpose

UM/UIM pays the insured and others covered under the PAP for damages caused by an uninsured driver or an underinsured driver that is either not carrying any liability coverage (uninsured) or the coverage is insufficient (underinsured) to pay for damages caused by that driver.

Part D Limits of Liability

Under Part D of the PAP, recovery is paid as the actual cash value of the stolen or damaged property or the amount necessary to repair or replace the property with other property of like kind and quality. The most the policy will pay for: 1. Any non-owned trailer is $1,500, 2. Loss to personal effects is $100 (fire and lightning losses only), 3. Unlimited coverage for a factory installed electronic equipment in the vehicle, 4. Permanently installed electronic equipment designed for reproduction of sound, not factory installed and including accessories, is $1,000 with higher limits available. (Permanently installed means installed by brackets, bolts or welding.)

**NOTE**

Wear and tear, mechanical breakdown and road damage to tires are not covered. The policy will not pay for diminished value to the insured's auto. (This is the difference in what your auto was worth before the loss and after the loss has been repaired.)

Part D - Insuring Agreement

When coverage for Damage to Your Auto (also referred to as Physical Damage) is shown on the Personal Auto Policy Declarations page, the insurer pays for direct accidental loss to the covered owned auto and any non-owned auto and its equipment minus any deductible shown in the Declarations. Settlement is made on an Actual Cash Value (ACV) basis.

PAP may include coverage for:

a. Uninsured and Underinsured Motorists; b. Medical Payments; and c. Damage to Your Auto (AKA Collision and Comprehensive).